2019 (4) TMI 231 - SC - Indian Laws

Supreme Court rules in favor of flat purchaser, orders refund with interest and compensation for service deficiency

Pioneer Urban Land & Infrastructure Ltd. Versus Govindan Raghavan And Pioneer Urban Land & Infrastructure Ltd. Versus Geetu Gidwani Verma & Another

The Supreme Court upheld the National Commission's decision in a case involving deficiency of service by a builder. The Court ruled in favor of the flat ... Consumer protection - validity of one sided agreement between the builder and buyer - right of buyer of flat in case of default committed by the builder / developer - Direction to pay the amount awarded by the National Commission with Interest - discharge of loan amount - Tripartite Loan Agreement - Held that:- In the present case, admittedly the Appellant–Builder obtained the Occupancy Certificate almost 2 years after the date stipulated in the Apartment Buyer’s Agreement. As a consequence, there was a failure to hand over possession of the flat to the Respondent–Flat Purchaser within a reasonable period. The Occupancy Certificate was obtained after a delay of more than 2 years on 28.08.2018 during the pendency of the proceedings before the National Commission. The Respondent – Flat Purchaser has made out a clear case of deficiency of service on the part of the Appellant – Builder. The Respondent – Flat Purchaser was justified in terminating the Apartment Buyer’s Agreement by filing the Consumer Complaint, and cannot be compelled to accept the possession whenever it is offered by the Builder. The Respondent–Purchaser was legally entitled to seek refund of the money deposited by him along with appropriate compensation. A term of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder - The contractual terms of the Agreement dated 08.05.2012 are ex-facie one-sided, unfair, and unreasonable. The incorporation of such one-sided clauses in an agreement constitutes an unfair trade practice as per Section 2 (r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the Builder. There is no hesitation in holding that the terms of the Apartment Buyer’s Agreement dated 08.05.2012 were wholly one-sided and unfair to the Respondent–Flat Purchaser. The Appellant–Builder could not seek to bind the Respondent with such one-sided contractual terms - appeal dismissed. Issues Involved:1. Deficiency of service by the builder.2. Entitlement of the flat purchaser to refund and compensation.3. Validity and fairness of the clauses in the Apartment Buyer’s Agreement.4. Rate of interest applicable on the refund.Detailed Analysis:1. Deficiency of Service by the Builder:The Supreme Court examined whether the builder's delay in obtaining the Occupancy Certificate and handing over possession constituted a deficiency of service. The builder was obligated to apply for the Occupancy Certificate within 39 months from the date of excavation, with a grace period of 180 days. The excavation commenced on 04.06.2012, making the final date for obtaining the certificate 04.03.2016. However, the builder failed to meet this deadline and only obtained the certificate on 23.07.2018. The Court cited *Lucknow Development Authority v. M.K. Gupta* and *Fortune Infrastructure & Anr. v. Trevor D’Lima & Ors.*, emphasizing that inordinate delays in handing over possession amount to a deficiency of service.2. Entitlement of the Flat Purchaser to Refund and Compensation:The flat purchaser filed a Consumer Complaint on 27.01.2017, seeking a refund of the deposited amount with interest and compensation for mental agony and litigation costs. The National Commission ruled in favor of the flat purchaser, holding that they could not be compelled to take possession after such a significant delay. The Supreme Court upheld this decision, stating that the purchaser was justified in seeking a refund due to the builder's failure to adhere to the stipulated timeline.3. Validity and Fairness of the Clauses in the Apartment Buyer’s Agreement:The Court scrutinized the clauses in the Agreement and found them to be one-sided, unfair, and unreasonable. For instance, Clause 6.4 (ii) allowed the builder to charge 18% interest on delayed payments by the purchaser, while the builder was only liable to pay 9% interest for delays in handing over possession. The Court referenced the Law Commission of India's 199th Report on unfair contract terms and *Central Inland Water Transport Corporation Limited and Ors. v. Brojo Nath Ganguly and Ors.*, concluding that the terms were oppressive and constituted an unfair trade practice under Section 2 (r) of the Consumer Protection Act, 1986.4. Rate of Interest Applicable on the Refund:The builder argued that the National Commission erred in awarding interest at 10.7% per annum, as the Agreement stipulated lower rates. However, the Court upheld the National Commission's decision, which applied Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017. This rule mandates that the promoter must compensate the allottee at the State Bank of India’s highest marginal cost of lending rate plus two percent. The Court found this rate just and equitable, especially considering the purchaser had to pay 10% interest on a loan taken to finance the flat purchase.Conclusion:The Supreme Court affirmed the National Commission's Final Judgment and Order dated 23.10.2018, dismissing the builder's appeal. The builder was directed to refund the amount deposited by the flat purchaser with interest at 10.7% per annum, excluding the period during which the stay order was in effect. The builder was granted three months to comply with the order.